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Using Clients’ Liquidity Events as an Opportunity for Generational Planning

Key conversations for advisors to have with baby boomer business owners and their families.
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In the U.S., the baby boomer generation controls more than 40% of all private companies, which will likely result in a wave of liquidity events in the coming decade as they look to sell their businesses. For these business owners, this may be a once-in-a-lifetime opportunity and experience. Their assets, identity, and time won’t be tied up in a business, and they’ll need to determine how to reorient their lifestyle after the sale. For advisors with baby boomer business owners as clients, this is a critical time to engage them and their families in broader generational planning discussions.

Advisors and their clients shouldn’t view a liquidity event as just a transactional and functional problem to be solved for. While critical, it’s only one part of the story. The reality is a liquidity event unfreezes and accelerates generational planning topics for families. Advisors need to rethink the “business-as-usual” planning approach and see this transition as a unique opportunity to step into the emotional, relational and generational parts of their clients’ lives. To help navigate what that experience could look like, here are some starting points.

A Liquidity Event Is an Implicit Change of Control

When a liquidity event unfreezes assets, it accelerates change-of-control conversations. Previously, only those involved in the business could have views and make decisions. That changes when the business is sold. The word itself—liquidity—describes a free-flowing opportunity that allows for more points of engagement. Think beyond one-on-one planning and help the primary decision-maker or couple talk about future decision-making within their family. Be proactive to help families explore questions such as, “How are we thinking about who will have a voice and who will have a vote in our decisions?” and “Where can we practice decision-making with the next generation?”

A Liquidity Event Creates Instant Transparency

When a business is sold, everyone knows money is moving, which can accelerate conversations around a family’s financial future. Use this opportunity to promote transparency across generations. Since 64% of wealthy individuals have not spoken with family members about passing on their assets, facilitate those conversations by asking, “How can we talk through what this new liquidity means for the family?” and “What topics should we be thinking about around this change?”

A Liquidity Event is a Door to Multi-Generational Engagement

The change of control and transparency conversations allow for the possibility of new generations being involved and accelerates a more holistic planning process. More than 70% of Gen XYZ say they want and expect their advisors to provide services beyond financial advice and investment management. A liquidity event is an open door for advisors to build a relationship with this next generation of family members. Facilitate this conversation by asking, “How can we get future generation voices and views into the conversation?” and “How are we thinking about the role everyone will play in planning going forward?”

A Liquidity Event Impacts on Lifestyle, Life Events and Life Stages

The sale of a business is a major life event that promotes conversations about future stages for everyone in the family. It may raise questions about health, location, and long-term care. And it can trigger a series of conversations beyond just those surrounding wealth. Help families explore questions like, “What does this event mean to our family?” and “How can we talk about our wishes for the future to inform our decision-making?”

A liquidity event unfreezes and accelerates generational transition opportunities for clients and their families. By proactively facilitating family conversations that step into the emotional, relational, and generational space, advisors unlock multiple points of value within the family and build relationships across the generations. Advisors also create connections that are hard for other advisory firms to replicate, which can help them distinguish their value-add and create a competitive edge.

Timothy Habbershon is Managing Director of the Fidelity Center for Family Engagement and Tobias Donath is SVP of the Fidelity Center for Family Engagement 

The opinions expressed are those of the Fidelity Center for Family Engagement and do not necessarily reflect those of Fidelity Investments.

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